European Implosion Resumes With Italy Firmly In The Vigilantes' Sights

The duration of the European bailout was 48 hours give or take. And now reality is back in the form of the following headlines:

Italian 10 Year BTP Yield surges to all time high 6.153% before ECB intervention takes it back to ... 6.122%

Expressed in price, they have dropped to a record 90.697

Italian-German 10 year yield passes 400 bps

Italy CDS soar 22 bps to 427 bps

Italy 5 Year yields bonds join drop, yield rises to over record 5.91%

See a trend? The one thing Europe was trying to avoid, contagion spreading to Italy, has happened.

And in other news, German retail sales 0.4% M/m vs est. 1.0%; Italian unemployment 8.3% vs est. 7.9%; Norwegian retail sales -0.5% M/m vs est. +0.2%, EU-to-German yield spreads all wider, significantly for Belgium, Italy, Spain, ECB deposit facility usage soars to €248 billion on Friday, up €30 billion on the day and just $21 billion off the 2011 high of October 10 (with 10 more days in the current cycle, we will see a new record in a few days). iTraxx resumes surge, XO up 18 to 636, Fins up 6.5 to 214 bps, even with sovereign CDS now irrelevant. How long before corporate CDS are banned? Yet despite all the news, the EURUSD is still firmly planted at 1.4000. Just as expected, the weak-hand shorts take every dip opportunity to cover. Fear not: opportunities will be ample in the days ahead.

Top Ramen for Christmas. Ask Costco to drop ship them. Get the early bird specials. Western nation Christmas is gonna be dreadful. No IPHONE, IPAD, Acura and diamond rings and his her toys. Stupid Fucks

It isn't really contagion. Italy had more potential than any to fall of the cliff. Berlusconi has borrowed his way to power. He has maintained his power due to borrowing. And the bill belongs to the tax payers. I assume mr Berlusconi has some nice riches in Switzerland, Austria, Panama etc.

His popularity in Italy over the years have shown the problem with democracy. No one votes for the guy who says "HIGEHER TAXES" "LESS WELFARE" "LONGER WORK HOURS" "RETIRE LATER". The one who gives gets the votes even if what he gives is built on nothing but a house of cards. In that way, people deserve what is coming. It is simply the democratic response to the house of cards crumbling if you like.

I am sad it always have to really crash before people wake up. Berlusconi and the bankers will be criminalized. Who cares, the end result is less welfare, longer working hours, higher taxes and a higher retirement age.

That said. I am afraid that contagion can happen NOW. France is the key. This is where the fences have to be built. We can not afford to "lose France". We REALLY CANNOT AFFORD TO LOSE FRANCE. But, we will! Then good luck to us.

Berlusconi, who has served as prime minister for about half the time since May 1994, has overseen a 13.5 percent cumulative increase in debt per capita while in office. The debt rose 5.1 percent under four other premiers in the period.

He has obviously had some tough times with higher borrowing costs and recessions baked in, but he has also had some glorious bull runs to surf on.

Eurodollar, my views on Italy go back to the late sixties and there is this little detail of what happened to all budget deficits since 2008. Cumulative nominal amounts are always higher for the later deficits, thanks to inflation. Shall I concede the point and retract to say that I "endorse" the Berlusconi Govs II + III only? Or shall I just concede and write a lame "without him it would be worse?".

The point I'd like to make is visible on the Bloomberg graph you've kindly provided: all Italian govs since quite a while were on a containement course. I just can't agree with this "uh, this man criminal, this man bankrupting country". Now, if they just would tighten the spending belt a notch...

"Berlusconi has borrowed his way to power"? No. Your graph is not conclusive.

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Note how the article is structured: "The debt burden almost doubled between 1982, when it amounted to 63.1 percent of gross domestic product, to 121.8 percent under Berlusconi’s first government in 1994"

Berlusconi I started in 1994 and ended in 1995. The article gives the impression his gov I doubled the debt from 60% to 120% (with 4.8%?). Just as a reminder how some little data is fudged in words. If the man says "I have inherited a huge debt mountain" and he refers to his first gov, then sorry, the rascal is right.

Ghordius; Thanks for the insight. As always there are shades of gray and most certainly you prove that point. Trust me, it is most appreciated! I am here to learn, and to get my views ripped apart :) I went about acquiring some experience first, now I am studying the theory. Now I find it too facinating. It consumes me. I can't stop reading, looking at videos or let the topic be at any family dinner. Feel free to crtitizise or bring me up to speed at any time, I love it.

Economic history (even the sixties is history for me) is something I haven't had the time to go through yet, but I will.